Kenya’s Industrial Sugar Tax Dispute Raises Fears Over Prices and Jobs

Kenya’s manufacturers are challenging a steep increase in the excise duty on imported industrial sugar, warning that the measure could raise production costs, threaten jobs and weaken the country’s competitiveness in regional markets.

The Kenya Association of Manufacturers (KAM) has filed a constitutional petition at the Milimani High Court seeking to overturn the tax increase introduced under the Finance Act, 2026. The duty on imported industrial sugar rose from KSh 7.50 to KSh 40 per kilogramme, representing an increase of approximately 433 per cent. The new rate took effect on July 1, 2026, according to reporting by The Star Kenya.

Industrial sugar is an important raw material for several manufacturing industries, including beverage production, confectionery, dairy products and processed foods. It is also used in certain pharmaceutical products. Manufacturers argue that taxing this input so heavily makes it more expensive to produce finished goods locally.

Manufacturers warn of rising costs

KAM estimates that the higher duty could add approximately KSh 6 billion to manufacturers’ annual costs. The association has also warned that production capacity in affected industries could fall by as much as 50 per cent, putting around 3,000 jobs and more than 300 internship and apprenticeship opportunities at risk.

The manufacturers argue that businesses already facing expenses for electricity, transport, labour and other operating requirements may struggle to absorb the additional tax. Companies could respond by reducing their profit margins, cutting production or increasing the prices of their products.

The association has further raised concerns about the combined effect of the excise duty, other taxes, levies and port charges. According to KAM, these costs could bring the total fiscal burden on imported industrial sugar to about 90 per cent of its cost, insurance and freight value.

# Could consumers pay more?

The dispute could have consequences beyond factories and their suppliers. If manufacturers pass some of their additional expenses on to customers, the prices of certain drinks, confectionery, dairy products and processed foods could rise.

Businesses that cannot absorb the higher costs may also reconsider investment plans, production volumes and staffing levels. However, the extent of any price increases or job losses remains uncertain and will depend on how individual companies respond to the tax.

KAM is particularly concerned about competition within the East African Community. The association argues that Kenyan manufacturers could be disadvantaged against businesses in Uganda and Tanzania, where it says industrial sugar does not attract a comparable excise duty.

According to the manufacturers, approximately 90 per cent of Kenya’s exports in the affected product categories are destined for regional markets. Higher production costs could therefore make Kenyan goods less competitive against products manufactured in neighbouring countries.

# Legal challenge focuses on the tax process

The association is also questioning how the increased rate was introduced. KAM argues that the KSh 40 duty was added during parliamentary consideration of the Finance Bill, 2026, rather than appearing in the version initially published for public participation.

It wants the High Court to determine whether the amendment complied with constitutional requirements and is seeking to have the contested provision declared unconstitutional. If successful, the association wants the previous rate restored.

The court’s decision could have significant implications for manufacturers, workers, consumers and the government’s tax policy. Until the legal challenge is resolved or the court orders otherwise, the disputed rate remains in force, according to The Star Kenya’s report published on October 15.

Source: Martin Mwita, The Star Kenya, “KAM seek reversal of 433% industrial sugar tax hike as parties return to court today,” October 15, 2026.